However, the income will be clubbed with yours and taxed at applicable rates. Instruments like the PPF are tax-free. In equity mutual funds, no tax applies if the gain is less than Rs 1 lakh a year.Tax benefit under: Section 80C (PPF, mutual funds, ulips)Savings: Up to Rs 1.5 lakh (u/s 80C) + income from investments

Rs 1,500 of the interest income per child for two kids will be tax-exempt if you open an account. In fact, any income will be entitled to an exemption of Rs 1,500 a year.Tax benefit under: Section 10(32)Savings: Rs 1,500 per child

If you have not exhausted Section 80C deduction limit, you can include the tuition fee paid for a maximum of two children each year.

Rs 50,000 for the premium paid. For parents below 60 years of age, this amount is Rs 25,000.

Tax benefit under: Section 80D

Savings: Up to Rs 25,000/50,000

2. Spousea. Take a joint home loanFor husband and wife who are co-borrowers and co-owners of a self-occupied property, each can claim a tax benefi t on interest and principal paid for a home loan.Tax benefit under: Section 80C (for principal) Section 24 (for interest)

Savings: Up to Rs 7 lakh (depending on amount of loan taken)

Note: Up to Rs 3 lakh for principal repaid (Rs 1.5 lakh each) + Rs 4 lakh for interest repaid (Rs 2 lakh each)b.

For further information, please email [email protected] or visit

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Managing Your Accounting and Bookkeeping in India In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India.

This makes it good tax free investment option for girl child.

Life insurance policy Maturity Amount

Maturity Amount of life insurance policy is tax free if the premium paid for all the years are less than 10% of the maturity amount. Surrender amount for endowment/traditional insurance is exempt from tax after 3 years while its tax free for ULIPs after 5 years.

Long Term Gains on Stocks & Equity Mutual Funds

The long term capital gains in equities & equity mutual funds used to be 100% tax free.

However Budget 2020 introduced tax on capital gains. Now long term capital gains up to Rs 1 Lakh is tax free.
Any gains above that is taxed at flat rate of 10.4% (including cess).

Sovereign Gold Bonds

There is no capital gains tax if the bonds are held till maturity. However the interest received is taxable.

In a family trust, assets are transferred by one party (settlor) and held by another party (trustee) for the benefit of a third party (beneficiaries). Typically, family homes are transferred as assets to these trusts, but other things of value like cash, bank deposits, shares, etc.

can also be included in the trusts.

Family trusts are popular structures that offer a variety of benefits such as asset protection, maintenance of family harmony, preservation of wealth, regulation of a third-party entry into family business, relief from the probate process, etc.

Contribution of property from a family member to a trust that has been created for the benefit of his relatives is tax exempt.

Furthermore, any distributions of assets or income from the trust to its beneficiaries under a private family trust will not attract any tax liability – either in the interim period or at the time of the dissolution of trust.

However, income that is earned by the trust, will be taxed depending on whether the trust is specific or discretionary. If it is a specific trust, where the share of each beneficiary is fixed, income can be assessed either in the hands of trustee or in the hands of individual beneficiaries at tax rates applicable to individuals or maximum marginal rate (MMR), depending on the income stream and certain other criteria specified in the Act.

If it is a discretionary trust, where the share of each beneficiary is not fixed, income of the trust is taxed at MMR.

FY 2019-20 [AY 2020-21]Income Tax CalculationAs EmployeeAs ConsultantCost to Company15,00,00015,00,000Taxable Income8,89,4007,50,000Standard Deduction50,0000Section 80C Exemption (-)1,50,0001,50,000NPS (Sec 80CCD(1B)) Exemption (-)50,00050,000Taxable Income after deduction6,39,4005,50,000Income Tax40,38022,500Education Cess1,615900Total Tax Payable41,99523,400

So if our lawyer friend choose to work as consultant he can easily save Rs 18,595 in taxes which is almost half of what he pays as employee!

In most cases consultants/freelancers have more tax efficient income as compared to employees!

Employee or Consultant: What should you choose?

As we stated above consultants have an upper hand compared to employees in terms of tax outgo.

In addition to providing emotional and physical support and comfort, your family members can also prove instrumental in providing you financial benefits. When it comes to your income taxes, certain money heads can be associated to specific family members in a way that gets you tax breaks.

Here is how you can invest, insure and save through your parents, spouse and children in a way that it reduces your tax liability.

Parentsa. Invest in their nameIf your parents fall in the non-taxable or a lower tax bracket, you can invest in their names by gifting them money. This amount will not be taxable as monetary gifts to specified relatives are not taxed.

This money can be invested in the Senior Citizens’ Saving Scheme, post office or other tax-saving schemes, even in fixed deposits.

By Rajeshree Sabnavis

Budget 2019 brought a steep 22% rise in surcharge rates for individuals having taxable income of more than Rs 5 crore, making the effective tax rate as high as 42.74%. And for this reason, a lot of high net worth individuals (HNIs) started to shift their income and asset base to tax haven countries.

However, the Income Tax Act provides several avenues to taxpayers to reduce their tax liabilities in a legitimate manner.

Some options include creation of Hindu Undivided Family (HUF), formation of Limited Liability Partnership (LLP) and family trusts.

Under the Act, HUF is considered as a separate legal entity and is taxed as the same rates as an individual. HUFs can be formed by Hindus, Buddhists, Jains and Sikhs.

The head of HUF is called the Karta, who is also the senior most male member of the family.

They can carry forward the remaining loss for 8 years and set off against STCG and LTCG only.

  • The investor can set off Long Term Capital Loss (LTCL) against Long Term Capital Gain (LTCG) only. They can carry forward the remaining loss for 8 years and set off against LTCG only.
  • Let us understand the tax treatment for income from investment in the US equity market.

    Tax on US Equity Dividends

    The dividend issued by the US companies to its investors is a taxable income both in India and US. Let us understand the tax treatment in both the countries.

    Tax on Dividend in US – Income from investments received as dividend is taxable in the US at a flat rate of 25%.

    This is especially true for people after retirement without any pension. Also there would be new entrepreneurs who need regular income until their start-up stabilises.
    We tell you 13 investments which can generate regular income for you along with their pros and cons.

    Tax Free Investments

    Tax Free Bonds

    As the name suggests any interest received on tax free bonds is NOT taxable and hence a good tax free investment for person in highest income tax slab. There are no fresh issues of tax free bonds now but they can be purchased through your Demat account from stock exchanges.

    Interest on Saving Account

    Interest received up to Rs 10,000 in saving account (either banks or post offices) is tax exempted u/s 800TTA.

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